According to Milken Institute, Malaysia has claimed the top spot for investors who are looking to put money into emerging and developing markets. It ranks higher than Thailand, China, Indonesia and Vietnam. The report reckons that Malaysia performed well on institutional frameworks, which has been thanks to its strong investors’ rights.
Malaysia has many other positive attributes apart from the Institute’s assessment filters that include business perception, economic fundamentals, and international standards and policy. It has a relatively young demographic that is expected to remain below 40 years of age for at least the next three decades. An ageing population is not something that Malaysia needs to worry about for quite a while.
And there’s more. Malaysia’s trade balance has been generally positive, apart from during the pandemic years. No real surprises there. Additionally, its economy boasts an annual growth rate that has averaged 4.4% from 2006 until 2023. Households also appear to have a propensity to spend. The growth in annual consumption expenditure per capita has been above the rate at which the economy has been growing.
Elsewhere, business confidence in Malaysia has averaged around 101.3 from 1998 to 2023. A reading above 100 would suggest that businesses believe that conditions could improve. This could imply a proclivity for companies to invest domestically, which could be another driver of economic growth.
On the whole, it is not surprising that investors have developed a liking for Malaysia. It certainly has potential. But for some, the memories of the 1997 Asian Financial Crisis and the country’s unorthodox response to the dreadful event might still loom large. That could help explain why Malaysian shares are valued at a discount to, say, Singapore counters.
But as investors it is important to look forward rather than back. Peter Lynch said that we can’t see the future through a rear-view mirror. He is right. Warren Buffett said as much, too. He quipped that in the business world, the rear-view mirror is always clearer than the windshield.
A few years ago, I felt that Malaysian shares were ostensibly cheap. I didn’t think the hefty discount was justified. It has, however, taken a while for the thesis to play out. But now it has. It only goes to show that investing is never about timing the market but time in the market.
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Disclosure: David Kuo does not own any of the shares mentioned.
